A European financial watchdog will issue a stern warning Friday about the risks associated with unregulated Internet currencies like Bitcoin.
The European Banking Authority statement will highlight the “violent fluctuations in [the value of] electronic currencies,” the danger that digital wallets may be hacked, and the lack of legal protections for users, the Financial Times reports. The value of Bitcoin has fluctuated wildly in recent months, swinging between $340 and $1240 this week alone.
The move comes after the People’s Bank of China ruled this month that Chinese banks will not process or insure Bitcoin transactions. Many financial investors have been enthusiastic about the usefulness of the stateless, digital currency, which can cut down on transaction fees and facilitate anonymous financial transactions online, but regulators fret over the ease with which Bitcoin, and other digital currencies, can be used for money laundering and other criminal activity. The online illegal drug marketplace Silk Road, which was briefly shut down by authorities after the arrest of its founder, operated entirely on Bitcoin.